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Presentation, discussion, and possible action on Resolution No. 25-023 approving Assignment Agreements relating to Private Activity Bond Authority, and containing other provisions relating to the subject
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RECOMMENDED ACTION
Adopt attached resolution.
BACKGROUND
Chapter 394 of the Texas Local Government Code provides for the establishment of local housing finance corporations (HFCs) for, among other things, the issuance of single family mortgage revenue bonds (SFMRBs) or mortgage credit certificates (MCCs). Federal tax law limits issuance of SFMRBs or MCCs through the allocation of volume cap. Chapter 1372 of the Texas Government Code (the Allocation Act) sets out the rules for allocation of volume cap in Texas. Until August 6 of each year, of the total volume cap available for single family mortgage bond purposes in Texas, approximately 33% is set-aside for the Department, and 10% for the Texas State Affordable Housing Corporation (TSAHC), leaving approximately 57% of the single family volume cap available for use by HFCs for the purposes of issuing SFMRBs or MCCs. On August 7 of each year, these set-asides collapse into a single family pool, available to the Department, TSAHC, and HFCs on a first-come, first-served, basis. On August 15, any single family volume cap that has not been reserved by a housing issuer becomes available for reservation by any issuer of private activity bonds for any authorized purpose.
HFCs were once very active in financing single family homeownership for low and moderate income homebuyers. However, in recent years, it has been difficult for HFCs to successfully issue SFMRBs or to implement MCC programs due to the combination of the up-front investment, interest rate risk, administrative costs, and other factors. As such, for several years now, the single family volume cap set-aside for HFCs has been largely unreserved.
Pursuant to Tex. Local Gov’t Code §394.032(e), an HFC can assign its volume cap to the Department “. . . to act on its behalf in the financing, refinancing, acquisition, leasing, ownership, improvement, and disposal of home mortgages or residential developments, within and outside the jurisdiction of the housing finance corporation, including its authority to issue bonds for those purposes.”
Through the assignment of volume cap the Department originates, on the HFC’s behalf, mortgage loans in the HFC’s jurisdiction through the Department’s My First Texas Home Program that are either financed by one or more of the Department’s SFMRB issues or originated in combination with an MCC.
The Department received its first assignment of volume cap in 2020 from Harris County Housing Finance Corporation. Since that time 16 different HFCs have participated and TDHCA has received $956 million in volume cap assignments. This year, we anticipate 12 HFCs will assign approximately $331 million in volume cap to the Department.
The Assignment Agreement substantially in the form attached to the resolution will assign volume cap to the Department.
Approval of the Assignment Agreements benefit the HFCs and the Department. The HFCs benefit economically through an ongoing fee received against loans originated on their behalf, within the HFC’s jurisdiction. More importantly, the HFC can actively and meaningfully participate in financing single-family affordable housing activity. The HFCs have indicated a desire to jointly market the program, including the coordination of outreach efforts to increase participation by low- and moderate-income homebuyers in HFC jurisdiction. The Assignment Agreements benefit the Department by expanding access to volume cap, which will assist the Department in maintaining current bond and MCC issuance levels. Ultimately, the benefit flows through to low- and moderate- income homebuyers in Texas that are able to access affordable financing options.